Civilisations need strong and properly functioning governments if they are to prosper. Without good government, economies and societies will fail.

These should be statements of the obvious. Only governments can trigger the investment in the physical, social and human capital necessary to support growth. Only government can redistribute the income needed to alleviate poverty, and promote more equal opportunity. But today the very idea of the legitimacy of government is threatened.

Government is sometimes its own worst enemy. Even those who want to defend the idea of the public realm must concede that public services need continual reform , that the state should have self-imposed limits and that although there may be reasons for caution about attacking the budget deficit, it cannot go on at current levels for ever. The state has to change even as you defend the idea of government.

It is a nuanced argument that is hard to make in these binary times. You are either for government, in which case you find yourself defending the sometimes indefensible – or like some cabinet ministers you seize on every mistake as an example of systemic incompetence, rage at every instance of excess and celebrate the private sector. Yet even if the latter were as perfect as its ideological proponents claim, and the "big society" was running at full throttle, there would still be a proper role for the government.

Curiously, this more subtle view of government and the private sector is most widely held by business, whose leaders are frequently trotted out to praise enterprise and rail against the dead hand of the state during elections. A recent global survey of CEOs showed a majority (61%) expressing concern over the size of today's fiscal deficits – but even more (72%) supported government policies to promote growth.

Business leaders readily acknowledge that it takes governments to do everything from building infrastructure to dealing with climate change, regulating finance and creating a skilled workforce along the way.

Nor is the issue solely economic. Public institutions are the means of expressing collective will and social solidarity: we want a strong police force, we value a service that delivers meals on wheels to the elderly. The public realm – a beautiful public park, an effective health service – is essential to our wellbeing. And it is the public character of these services that is so critical; they are available for every citizen and accountable to each of us. This does not mean that every such service has to be delivered by a public body; but if it is contracted out, it must retain its public character. Such qualities cannot be privatised.

This is the background to the review of fair pay in the public sector that I have been leading for the last nine months, commissioned by the prime minister and chancellor and published later this week.

There is undoubtedly a widespread perception that public sector managers are overpaid despite leading organisations that are inefficient. But if the debate about pay levels assumes that the public sector is a burdensome disaster, it can only demotivate staff who work there. If the overall reward package gets too weak, especially given the huge differentials with parts of the private sector, then it will make it harder to recruit and retain good people just at the moment the UK is embarking on an ambitious programme of public service reform.

There is indignation against public sector managers' pay because they have been caught up in the backlash against the huge growth of the earnings of the top 1% over the last generation. Over the last nine years alone, CEO pay in our leading companies has doubled, despite little tangible increase in performance. Bonuses have been paid in bailed-out banks. There is widespread scepticism that these huge payments have been deserved.

Yet 90% of the British make less than £45,000 a year; to them £300,000 is a huge amount of money. We are more likely to be forgiving if we believe that such amounts are deserved because their recipients have produced brilliant results as the result of hard work. The trouble is that in Britain there is no framework in either the public or private sector to explain why top pay is what it is. Almost nobody reads the technical and almost unreadable Remuneration Committee reports from our major companies, so that extraordinarily half the average remuneration of our CEOs is paid in generous grants of shares that very few can justify.

Nor is the situation any better in the public sector; try to find an explanation of why top executives are paid as they are and what they do to earn their money and you search in vain. Most public officials are more apprehensive about being caught in the full glare of publicity over pay than their private peers – either running scared or at worse trying to disguise their rewards.

Thus we have what we have. Private sector fat cats – who warrant most of the criticism – and their public sector counterparts, certainly paid very much less, but no less vulnerable to criticism because there is no pay framework by which to justify what they earn. This is red meat to both sides of the binary divide about the value of good government.

But if you believe reality is more nuanced, and that public and private need each other, the consequence is a disaster.

Britain needs a grown-up conversation about the relationship between its public and private sectors – and a framework in which taxpayers , shareholders, workers and customers can understand why our bosses are paid what they are, and to limit it when it gets out of hand. Stand by this week for my stab at an answer.